Update July 2005: P&A Investigations
With fraud now the fastest growing industry in the UK and
losses overtaking traditional bad debt write offs, itçs highly
likely that a number of your clients will have suffered a
loss in recent times. That could lead to a serious situation
when business confidence, in a benign economy, is at a low.
Business proprietors tend to get very little guidance from
any of their professional or trade bodies to enable them
to manage a fraud problem - and unless the sums are very
substantial, the police appear to be under resourced to be
able to provide practical, on the spot assistance. Research
tells us that when a fraud is discovered the last person
to be told is often the accountant, much less the local trade
association or their competitors. Itçs almost as if business
proprietors are ashamed at being caught out!
Apart from the physical loss there are other considerations;
regulated advisors, such as accountants and banks, have a
legal duty to report any criminal activity or fraud to the
National Criminal Intelligence Service (NCIS) as soon as
it comes to their attention. If the 'incident' is managed
under a lawyer's 'cloak of legal privilege', it would enable
the investigation to be carried out in an orderly manner
with controlled exposure of the case to the media and the
Law Enforcement Agencies. This is particularly important
if there are elements of non-compliance of regulations or
personnel disciplinary issues that are likely to confront
the business proprietors.
However, not all lawyers are qualified to deal with issues
in respect of fraud or money laundering. A call to P&A Investigations
by the proprietors will enable us to ascertain whether the
client's lawyers are suitable - if not, we will make recommendations.
P&A Investigations will lead the detailed investigation,
using the businesses accountants to carry out the financial
forensic work if they have the capability. This joint approach
enables the case to come to a satisfactory conclusion.
Laurie Beagle, an accomplished consultant in process strategy
and development heads up this specialised division of P&A
and is supported by Fred Parr. Both are very experienced
consultants in the field of fraud prevention and detection
- both have considerable commercial experience - Fred spent
16 years as a senior detective in the commercial fraud section
of New Scotland Yard, and has many years experience of commercial
fraud investigation in the private sector. They are available
to give lectures at client events, to provide on site training
for key personnel of client firms and, of course, to respond
to requests for assistance or to review current policies.
The Division has a comprehensive schedule of capabilities
from practical pre-emptive reviews at one end of the spectrum,
to very detailed investigations and support where serious
loss is revealed.
There is a schedule of capabilities at www.pandareceivables.com/investigations-capabilities.html.
Some examples of recent cases are attached and demonstrate
the wide remit of this division.
If you would like us to support a client seminar, provide
training or have a client with a fraud problem, speak to
Laurie Beagle or Fred Parr on 0114 278 8868 or email investigations@pandareceivables.com.
Example Cases: Employee (Expenses) Theft
A Borough Councillor and former mayor was charged with 16
counts of falsifying his expense claims. The charges were
brought following a lengthy investigation of the Borough
Council. We were instructed by the defence team to investigate
the evidence gathered by the police and also to examine the
Council's systems and procedures in respect of Councillors'
expenses.
Our investigation revealed a number of discrepancies in
respect of the various charges together with shortcomings
in the Council's systems. Following our report the majority
of charges were subsequently dropped. The former Councillor
pleaded guilty to a small number of charges totalling around £1,500
and received a suspended sentence.
Employee Theft - Investigation
A physical stock take at a branch of a DIY Company revealed
significant shortfalls against the Companyçs stock records.
The manager of the branch was questioned but claimed that
the difference was due to spoilt stock and replacements not
recorded on the computer.
Our investigations revealed that in addition to the missing
stock significant amounts of cash had also been stolen, and
to conceal the theft, the suspect was making up the daily
shortfalls from the following days' takings. The branch manager
was subsequently charged with 7 counts of theft and false
accounting.
Bribery
A small family owned computer consumable company tendered
and won a large contract for supply of consumables to a large
national Company operating a chain of department stores.
For several years, the Company was successful in retaining
the contract despite intense competition from its larger
rivals.
Following a family dispute, one of the directors left the
Company and subsequently sent copies of the Company's tenders
and correspondence to the Department store. We discovered
the Company had provided the Storeçs buyer with a luxury
car, free of charge, for a number of years and had also made
significant payments to the buyer. Correspondence revealed
that the buyer who was in sole charge of this contract was
opening the competitorsç tenders early and tipping off the
Company with their prices.
Further, the Department Store used sample testing of certain
key items to evaluate contracts.
The Company was informed in advance of these items and ensured
that its prices were below its competitors. The prices for
the remaining items were then proportionately increased.
The Department Store decided not to prosecute but instead
dismissed the buyer and brought a large civil claim against
the Company. This claim was initially resisted but subsequently
settled for a large sum.
Breach of fiduciary duties (and ineffective investigation)
The managing director ("MD") of a UK subsidiary of a large
American Company was suspected of impropriety and breach
of his fiduciary duties. Following a brief internal review,
it was decided to dismiss the MD for gross misconduct. The
MD was summoned to the area director's office and summarily
dismissed.
Following his dismissal, the former MD went to his office
and removed the Company's desk top computer, carried this
to his car and drove off. Upon discovery, the directors sent
a messenger to his house to collect the computer but discovered
that its hard disk had been completely erased. Further investigation
revealed that the MD had also over ridden the Companyçs back
up procedures and his files had not been backed up by the
Company. The former MD brought a large claim against the
Company for unfair dismissal. Despite enlisting computer
specialists, the Company was unable to recover the contents
of the MDçs computer.
Our investigation revealed that the Company[s internal review
had not been conducted properly and adequate supporting documentation
had not been gathered prior to dismissal.
The investigation did however reveal some breaches by the
former MD, although, gross misconduct could not be conclusively
proved. The claim was subsequently settled.
Computer Forensics
Identified anomalies in user activity that ultimately revealed
bogus employees were engaged in acquiring intelligence on
behalf of competitors. The true identity of the recipients
were revealed, tracked down and the misappropriated propriety
information was retrieved and their system secure against
future breaches
Employees Screening
A major firm of Insurance brokers was approached by a lady
seeking employment and offering to bring with her business
which would attract at least £1 million in commissions. Although
the department head was anxious to employ her, we were asked
to investigate and check her employment history.
It was immediately discovered that the details provided
by the subject could not be verified and when her previous
maiden name was ascertained from research sources, a new
and more sinister picture emerged. It was revealed that the
applicant had three previous convictions for major fraud
and her last court appearance had resulted in a 4 year prison
sentence.
Media coverage reported that the Judge on that occasion
had been extremely critical of her employer for not having
carried out sufficient checks into her previous employment
history.
Our client's offer of employment to the applicant was withdrawn.
Investigations
A UK based company was contacted by an offshore organisation
with a view to commencing to trade and setting up a credit
account. The UK company decided that they would trade and
set up a small credit account of about £3,000. However the
first order received was in excess of £13,000. To accommodate
their new customer the UK Company agreed to accept bankers
drafts in payment for their goods prior to shipping the same.
In a two-month period goods were supplied to value of about £100,000.
However on being banked the UK Company discovered that they
had not received Bankers Drafts, but cheques and these were
returned unpaid as they were forged.
The UK Company thought that they had covered all the possibilities
in trying to prevent this from happening; however it can
be seen that they had not. This company had an extremely
experienced Credit Control Department. Do not think that
it cannot happen to you.
These few case studies are just a small example of the varied
help and support we are able to give to your clients. We
believe we can add value to your client relationship by giving
you support and assistance in promoting awareness of an increasing
problem that businesses undoubtedly face. There is more information
about the capabilities of P&A Investigations at www.pandareceivables.com
July 2005
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